House Panel Backs Troop Retirement Overhaul Despite Vets' Objections

A key defense panel in the U.S. House of Representatives voted to overhaul troop retirement benefits despite objections from members who served in the military.

The House Armed Services Committee early Thursday morning voted 60-2 to approve the 2016 National Defense Authorization Act, which included the future retirement change as part of a policy and spending blueprint for the fiscal year beginning Oct. 1.

The legislation will head to the full chamber for a vote by mid-May but would still have to be agreed to by the Senate and signed by President Obama before becoming law.

The bill would offer service members a 401(k)-style retirement plan by 2017 with matching contributions and full vesting after two years. Some veterans groups have embraced the proposal, while others have opposed it. Several lawmakers, including veterans of the wars in Iraq and Afghanistan, were reluctant to change the decades-old military retirement system.

"We need to do more education on this," Rep. Chris Gibson, R- New York, who served as an Army officer in Iraq, said on Wednesday during an hours-long debate of the bill. "We are talking about a complete overhaul of the military retirement system."

The so-called "hybrid" or "blended" retirement system -- including both a traditional defined-benefit plan and a new defined-contribution plan -- was arguably the most controversial of 15 recommendations released in January by the blue-ribbon Military Compensation and Retirement Modernization Commission. The reforms were designed to give military families more benefits options while saving the government $12 billion a year by 2040.

Gibson, who spent nearly three decades in the service before becoming a congressman, introduced an amendment to delay the retirement overhaul by a year to further study the idea and solicit more feedback from troops.

"A lot of folks are not tracking this major change," he said. "In my time in uniform, it was so important to listen to my non-commissioned officers, my subordinate commanders and my paratroopers. This was very important to the unit that we got a shared sense of the organization before we move forward ... We're in no rush to do this. I think we're better off listening first."

Other lawmakers with military backgrounds expressed support for Gibson's amendment.

Rep. Ruben Gallego, D-Arizona, a former Marine who served in Iraq, said many service members are puzzled by the retirement proposal.

"In talking to a lot of my former platoon members, some of them who are still in, who are serving as a staff sergeant and higher, other friends that are currently in the military, they're very confused by what's going on here," he said. "I've tried explaining it to them, and I know that if they're confused, there's going to be thousands of families that are going to be very confused, both dependents and current members and their sons and daughters that want to join the military."

Rep. Steve Russell, R-Oklahoma, a retired Army lieutenant colonel who deployed to Iraq, Afghanistan and Kosovo, said retirement pay is designed in part to retain troops with critical skills.

"I think there's a misunderstanding of what retirement pay is and as very few retirees of the active force reside in Congress, I think it's important to point out that retirement is retainer pay. It is not some transferrable type of collected property. It is retainer pay. It is half pay for half duty. It's also important to point out that as a member who retired, you never come off duty -- you get half rations for half duty and you're subject to recall for the rest of your life."

The amendment, though, was ultimately rejected by a majority of committee members.

Rep. Joe Heck, R-Nevada, who heads the panel's personnel subcommittee, noted that the commission spent nearly two years studying the retirement issue and other military compensation reforms. He also pointed out that the retirement change doesn't affect currently serving troops or retirees.

"It's prospective," he said. "If they want to come in, they can. They are not obligated."

Under the military's existing defined-benefit plan, most officers and enlisted personnel who serve 20 years receive annual retirement pay equal to half of their average basic pay over their last three years of service. The legislation would reduce that figure from 50 percent to 40 percent, in part to fund a 401(k)-like defined-contribution Thrift Savings Plan for the more than eight in 10 service members who leave the military without getting any retirement benefit.

Heck said the retirement change would include a lump-sum "continuation" payment after 12 years in exchange for four more years of service -- a force-shaping tool designed to keep troops in the military and entice them to consider staying for a full 20 years. Unlike the commission's recommendation, it would also extend matching contributions to the TSP beyond the two-decade mark to retain senior NCOs and officers, he said.

"What we're saying to DoD is, take the recommendations as spelled out in the bill, come back to us with an implementation plan and identify any challenges that you may see, by March 1 of next year, before the NDAA season begins, so that if we need to redirect course, we can," he said. "But we continue to march toward an implementation date of Oct. 1, 2017."

Rep. William "Mac" Thornberry, R- Texas, chairman of the House Armed Services Committee, praised Heck for including the retirement overhaul and "at least 11 other recommendations" made by the congressionally mandated commission, according to a fact-sheet on the defense legislation.

"There is always going to be an excuse for delay," Thornberry said during the hearing. "This is the time to act."

At the same time, the chairman defended the idea of waiting to implement the new retirement benefit.

"Chairman Thornberry welcomes moves to provide additional options to individuals who serve the Nation for a period of less than 20 years, while delaying implementation until 2017 to allow DoD and relevant stakeholders time to weigh in," the fact-sheet states. "For the first time, this plan would allow the 83 percent of service members not eligible for military retirement to participate in a retirement plan within the confines of the system.

"This system will allow new service members to contribute to a portable Thrift Savings Plan with matching contributions from DoD," it states. "The reform also preserves a structure that encourages service beyond 12 or 20 years."

Organizations that represent combat veterans, including the Veterans of Foreign Wars of the United States and the Iraq and Afghanistan Veterans of America, supported the change because it would provide retirement savings for troops who leave the military before the 20-year mark. Meanwhile, the Military Officers Association of America and other groups argued against it in part because it would add more risk to retirement portfolios.

"Defined contribution plans are unpredictable and contingent on variables like fund choice, rates of return, member contributions, inflation, cost-of-living increases, and other economic factors," an article on the MOAA website states.

The defense bill also includes other commission proposals to adopt financial literacy training for troops, create a joint medical command to oversee medical personnel and equipment across the armed services, keep the commissary benefit for military families and retirees, and improve collaboration between the Defense Department and Veterans Affairs Department to provide job training and transition assistance to those leaving the military.

The legislation doesn't address the commission's recommendation to replace the existing Tricare program with a choice of commercial health insurance options. But it would support a higher pay raise and housing allowance for troops than the Pentagon proposed.